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Posts tagged ‘dynamic pricing’

A couple of days ago, an article published in DNA made quite an interesting read explaining how a man paid Rs. 11904 for booking two premium tatkal railway tickets when he had been quoted a price of Rs. 4334 at the time of booking on the IRCTC portal.

Seasoned users of IRCTC know that availability positions on the website are untrustworthy during Tatkal hours and thus a confirmed ticket displayed the previous second might turn into a waitlist 12 by the time electronic payment is actually made. By extension, a dynamic pricing system too is expected to suffer from the same problem. This is also the exact defence put forward by IRCTC to DNA. In other words, ‘Sorry consumers if the system might seem non-transparent but there are simply too many of you for us to handle simultaneously at that speed’.

Contradicting basic ethics

This sort of explanation might pass muster for normal Tatkal tickets at fixed fares but rings hollow in the context of premium Tatkal. The problem is that it contradicts the basic ethics behind a buy sale transaction. Let me explain. Tickets are a scarce resource and IRCTC believes that market forces should decide the price of some tickets so that it could cash in on the real higher price of tickets, similar to what happens in an auction. So it goes for dynamic pricing in which successive tickets are priced higher till they reach an upper ceiling. Very good in theory but unfortunately, in real time, the pressure on the IRCTC servers is such that people have no idea about the price they will be actually paying for the ticket and the allotment of fare is more or less like in a lottery.

The way I see it, IRCTC has priced a certain number of tickets at various prices and systematically matches users to these tickets at first come first serve basis. This is intrinsically different from an auctioning process in which bidding is done by the users at prices decided by them.

Today, a user sitting down to purchase a premium Tatkal ticket knows nothing beyond that he will pay a price between the opening price and the capped maximum limit, currently at three times the base fare. As every moment matters when booking a Tatkal ticket, many users banking with SBI avail the IRCTC quick pay servicethat skips several important confirmation pages specifying the exact amount being paid. Thus many users will know the actual amount only through informational SMS alerts. Even users not paying through quick pay services are expected to react in fractions of a second as to whether the fare is appropriate as a delayed reaction might result in a lost ticket. On the other hand, tickets once booked cannot be cancelled.

Now, it is technically correct to say that a user accepts the terms and conditions prior to using the website and users are free to make their own decisions regarding using the website but is it ethical for a monopoly website to behave in this manner?

It is just plain wrong

With long waiting lists in trains and sky high air fares, pun intended (if flights indeed are available between the source and the destination), Tatkal is the only feasible option available for many commuters travelling at short notice. Premium Tatkal quota gets its allotment by eating from the regular Tatkal quota that itself gets its quota by eating from the general pool (remember, no capacity has been added) which basically means that there are lesser cheaper tickets available than before. Charging an unknown fare to a helpless and desperate consumer for normal services made artificially scarcer with absolutely no premium features is just, well, wrong.

Raking in the moolah

Sadly, the brilliant B-school mind, that had devised this technique of making the railways more money without raising the general passenger fare, either did not spot or worse, deliberately ignored the incredible unfairness of the system. On a related note, I suspect a similar kind of mind behind the increase of advance booking window to an unreasonable 120 days (from planning perspective in the fast moving 21st Century) and higher cancellation and service charges to cash in on the higher ticket churn this will inevitably result in.

Premium Tatkal isn’t a write-off though: a suggestion

Premium Tatkal is not necessarily a bad idea. Many people are currently paying agents a substantial premium for Tatkal or even normal tickets on busy routes. Premium Tatkal is cashing in on this premium legally and passengers might also be happier with the mechanism as they do not have to resort to touts.

My suggestion would be to chuck dynamic pricing and charge every premium Tatkal ticket the same fare. The fare could be the average price of all premium Tatkal tickets currently being sold for a train. Railways would earn the same revenue but users would know in advance what they are paying.

Railways is supposed to be for the people

The railways may have a corporate objective to make profits but it must remember that it is providing a basic public service on public land using taxpayer money. As no private competitor is allowed by law, it has an ethical obligation to price its services fairly.